The deadline for filing your tax returns is quickly approaching on Monday, April 18th. Here are some last minute tax tips to avoid IRS audit red flags that create trouble down the road:
Make sure your math is correct. This one appears to be obvious, but math errors deeply trouble IRS systems and will often kick a return out for an IRS audit review. Math errors are one sign that a taxpayer has been massaging numbers in order to get to a specific refund amount, and while a single transposition or addition error won’t compromise your return, a series of errors in calculations is sure to draw the agency’s attention.
Be cautious with charitable deductions you can’t back up with a receipt. This is another area where taxpayers often attempt to squeeze the numbers. If you’ve been generous, you deserve to claim every donation, just make sure you have receipts available if questioned by the IRS. The average income for US households is $55,000, so $18,000 in charitable donations will attract unwanted attention from IRS auditors.
Reporting too many business expenses, or excessive or consecutive losses on Schedule C. If you have a business the IRS expects it to make a profit. Too many years of losses, or a business with a high expense to income ratio is one of the fastest ways to ensure an IRS audit.
Include all of your income. Many US taxpayers unfortunately ignore 1099’s and only report W-2 income. This is a serious mistake that will often trigger a broader IRS audit. One of the first checks the IRS performs is to compare your return with all W-2s, 1099s and other income reporting forms the agency has received. Make sure to include them, no matter how small they may appear.
The experienced tax attorneys at Allen Barron prepare taxes for businesses, business owners and individuals throughout San Diego. If you are filing your own taxes we hope these tips help you to avoid IRS audit red flags on your return. If you are contacted by the IRS with any question regarding your return you should seek advice before responding as this is usually an information seeking fishing expedition on the part of the IRS in preparation for an audit. We invite you to contact us for a free consultation at 866-631-3470.